A recently released report by the Minister for Justice and Customs Chris Ellison outlined the proposed reforms, which are in line with new international standards.

Anti-Money Laundering Law Reform Issues Paper 5 suggests lawyers, accountants and company and trust service providers would have to develop new internal mechanisms to detect money laundering and report on suspicious activity by their clients.

Possible areas of reform for legal practitioners, according to the report, include new compliance arrangements for lawyers and firms who advise clients in relation to a range of activities that involve financial transactions. There would also be new reporting requirements across a range of client and transactional activity, not just cash transactions.

The president of the Law Council of Australia Bob Gotterson QC said the report raised some significant issues which may have wide ranging ramifications for lawyers and law firms.

“When similar anti-money laundering powers were introduced in international jurisdictions, it prompted intense debate about how they might affect the well established principles of legal professional privilege and client confidentiality,” Gotterson said.

The issues paper acknowledged the compatibility of monitoring client activity for suspicious activity and then reporting it to a government agency with obligations of client confidentiality “is likely to be of concern to legal practitioners in terms of client legal privilege”.

But “legal practitioners are not required to report suspicious activity if the relevant information is subject to client legal privilege”, the issues paper states.

The Law Council raised concerns over the grey area of where privilege starts and ends. “Regard must be had for the areas of uncertainty which inevitably arise in everyday practice. Indeed, one might envisage a situation where a client’s motives and actions are unclear, but not necessarily suspicious,” Gotterson said.

A spokesperson from the Attorney General’s Department told Lawyers Weekly that most lawyers were already fully conversant with the issue of where a privilege starts and where it ends, “as it arises in the course of every day legal practice”.

“Therefore, the proposed reporting requirement should not impose an additional burden,” the spokesperson said.

For law firms, the costs of compliance could prove to be considerable, according to the Law Council, and the profession would need to contemplate and provide comment on this.

“These are but a few of the issues which the Minister for Justice and Customs will need to consider carefully in the progression of this matter,” Gotterson said.

The Law Council has asked its constituent state and territory bodies to nominate suitable lawyers with a view to establishing a small working committee to oversee its formal submission in response to the government’s paper. The Council will make further comment once this submission has been completed.